Did Illinois approve a pad-printing equipment package for the graphic-arts machinery exemption?

Plain-English summary

The Department did not approve the proposed pad-printing equipment package for exemption. It said the request did not provide enough description or explanation of the purpose and use of each listed item and therefore declined to issue a PLR.

The historical rule described exempted new and used machinery and equipment, specially ordered equipment, and repair and replacement parts used primarily in graphic-arts production. It extended to a lessor purchasing property to lease for that qualifying use. Covered printing methods expressly included engraving, letterpress, lithography, gravure, flexography, screen, quick, and digital printing.

For purchases on or after July 30, 2009, the GIL says the machinery also had to be used primarily to produce tangible personal property for wholesale or retail sale or lease. The purchaser had to certify the equipment's use to the supplier.

What this means for you

Calling a process “gravure” or a component “primary” does not establish exemption. Document each item's actual function, primary use, relationship to production, and the disposition of the printed output before using an exemption certificate.

Common questions

Q: Did the GIL say pad printing itself was outside graphic arts?
A: No. It noted that gravure printing was an included method but did not decide the equipment package.

Q: Were ancillary conveyors and packaging items approved?
A: No. No listed item received specific approval.

Q: Did the exemption cover repair and replacement parts under the rule described?
A: Yes, when used with qualifying machinery and all conditions were met.

Subject

Graphic Arts

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0126.pdf

Original ruling text

ST 10-0126-GIL 12/27/2010 GRAPHIC ARTS
The Department’s rules regarding the Graphic Arts Machinery and Equipment Exemption are
set forth at 86 Ill. Adm. Code 130.325. (This is a GIL.)

December 27, 2010

Dear Xxxxx:
This letter is in response to your letter dated August 12, 2010, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
I have a very specific question that relates to Title 86 Part 130 Section 130.325 Graphic
Arts Machinery and Equipment Exemption. It seems like a future purchase will fall
within this exemption and I am seeking an officially documented approval of this
exemption prior to purchasing to avoid any misinterpretation fines or penalties. The
following are brief descriptions of the machinery and components as well as the
company purchasing the machinery.
COMPANY is a direct/wholesaler with a particular interest in custom pad printing on
multiple different substrates. Pad printing is a graphical arts process that involves the
transfer of an image from a plate to the substrate via smooth silicon padding. It is also
known as gravure printing which specifically mentioned as exempt throughout the Title
86 Part 130 Section 130.325 Graphic Arts Machinery and Equipment Exemption. The
primary and ancillary equipment being purchased will be used only for the graphical art
purpose of pad printing. The following is a table of the primary and ancillary equipment
as well as a description of their functionality within the pad printing system. Please see
below.
COMPANY Pad Printing Equipment Acquisition
Equipment

Primary or
Ancillary

Description

Model KP-06 1-Color
Primary
8 Station Mechanical 700mm
Primary
Rotary Table
Flamer Unit on Pneumatic Slide Primary
2 Sets of 8 Custom Machined
Primary
(2 up) fixtures
Pick and Place Device
Primary
(With Extended Reach)
Stand and Guarding with Light
Primary
Curtain
PLC and Controls - Touch Screen
OIP (8” HMI Upgrade)
Hot Air Feature
Primary
Conveyor Oven #1
Primary
RapidFire Laser Etching System Primary
Self Contained Exhaust Unit

Primary

Model KP-05 1-Color
Custom Stand

Primary
Primary

Stand-alone Flamer
Conveyor Oven #2
Stratus Horizontal Wrapper

Primary
Primary
Ancillary

Markem SmartDate 5 Coder

Ancillary

Additional Infeed Chain

Ancillary

Basic Spare Parts Kit

Ancillary

Remote Start/Stop With Local/
Ancillary
Remote Switch
High Product Sensor (Photoeye Ancillary
or Limit Switch Version)
No Product/No Bag
Ancillary
Up and Downstream Interface
Ready Signal
Dorner 2200 Incline Conveyor

Ancillary
Ancillary

Dorner 2200 Incline Conveyor

Ancillary

Dorner 3200 Horizontal Conveyor Ancillary
Synchronized Single Toothbrush Ancillary
Drop-Bucket
Accumulation Drop-Bucket
Ancillary
Case Nest

Ancillary

Pad printing machine
Substrate conveying rotary
table
Substrate pretreatment station
Substrate fixturing mechanism
Substrate conveying removal
and placement mechanism
Operator safety guarding
Primary Pad printing user interface
Substrate post treatment station
Substrate additional post
treatment station
Printing plate production
equipment
Printing plate production
equipment
Pad printing machine
Pad printing machine support
stand
Substrate pretreatment station
Substrate post treatment station
Graphically printed substrate
packaging equipment
Graphically printed substrate
packaging equipment
Graphically printed substrate
packaging equipment
Graphically printed substrate
packaging equipment
Graphically printed substrate
packaging equipment
Graphically printed substrate
packaging equipment
Graphically printed substrate
packaging equipment
Graphically printed substrate
packaging equipment
Graphically printed substrate
conveying system equipment
Graphically printed substrate
conveying system equipment
Graphically printed substrate
conveying system equipment
Graphically printed substrate
conveying system equipment
Graphically printed substrate
conveying system equipment
Graphically printed substrate

Programming and Control
Integration
ACSI Model 138CAP Belt

Ancillary
Ancillary

conveying system equipment
Graphically printed substrate
conveying system equipment
Graphically printed substrate
conveying system equipment

If this purchase would fall within the exemption for form ST-587, please send a
notification as soon as possible.
Thank you very much for your time and consideration,

DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization” provides that
“[w]hether to issue a private letter ruling in response to a letter ruling request is within the discretion of
the Department. The Department will respond to all requests for private letter rulings either by
issuance of a ruling or by a letter explaining that the request for ruling will not be honored.” 2 Ill. Adm.
Code 1200.110(a)(4). Your letter fails to provide any description, information or explanation
regarding the purpose and use of each of the items identified in your letter. Therefore, it is the
Department’s position that we must decline to issue a Private Letter Ruling. However, we hope the
following will be helpful in addressing your question.
The Department’s rules regarding the Graphic Arts Machinery and Equipment Exemption are
set forth at 86 Ill. Adm. Code 130.325. Under the graphic arts machinery and equipment exemption,
Retailers’ Occupation Tax does not apply to sales of machinery and equipment, including repair and
replacement parts, both new and used and including that manufactured on special order to be used
primarily in graphic arts production. The exemption extends to purchases by lessors who will lease
the property for use primarily in graphic arts production. Taxpayers must certify the use of the
equipment they are purchasing to their suppliers. The Department’s regulation at Section
130.325(b)(1)(D) provides that “[t]he exemption includes printing by methods of engraving,
letterpress, lithography, gravure, flexography, screen, quick, and digital printing.”
On and after July 30, 2009, P.A. 96-116 imposes the additional requirement that the qualifying
graphic arts machinery and equipment be used primarily in the production of tangible personal
property for wholesale or retail sale or lease.
I am sorry we could not be more helpful. If you require additional information, please visit our
website at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217)
782-3336.
Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk